The Changing Face of Innovation in South Africa Prof. Michael Kahn  Research and Innovation Associates and IERI, Tshwane U...
The Big Picture  <ul><li>1989: The fall of the Wall: ICT revolution opens the world </li></ul><ul><li>1990s … innovation t...
Technological innovation is critical to long-term economic growth. Most technological innovation consists of incremental c...
The evidence? Source: KDI and K4D
<ul><li>Industries must be helped to manage scarce resources more efficiently and to reduce greenhouse gas emissions throu...
<ul><ul><li>Pre 1948 </li></ul></ul><ul><ul><ul><li>Civil War I (1889-1902) and European War I & II; agriculture    minin...
The deviation from modernity SOCIAL INNOVATION GONE WRONG
<ul><li>Open economy with convertible currency  </li></ul><ul><li>Limited inward FDI </li></ul><ul><li>Legislation for Hum...
<ul><li>African middle class emerged under apartheid;  technical and entrepreneurial class throttled  </li></ul><ul><li>Hi...
The future ain’t what it used to be
<ul><li>Innovation  is the dissemination of a new good or service in an organization or market.  New to the firm (or org),...
<ul><ul><li>Lack of internal funds </li></ul></ul><ul><ul><li>16% of innovating size class 1 firms  </li></ul></ul><ul><ul...
<ul><ul><li>Own funds – principal source </li></ul></ul><ul><ul><li>Backing ‘winners’ – PBMR (SASOL; ARMSCOR ....) </li></...
People matter most! Source: Annual Reports, 2007 (Author) Source: DNE (1993),DST (2007),  Author Full-time equivalent Rese...
From the OECD Review  Given the scale of the total investment involved (in infrastructure projects), even quite a small co...
Agents and linkages, local & global 100s NGOs POLITICAL LEGAL ENVIRONMENTAL CULTURAL STANDARDS ASSOCIATONS LINKAGES I.P. R...
<ul><li>The national system of innovation (NSI) must be prepared to meet the requirements of innovation: </li></ul><ul><ul...
 
 
Emalahleni Water Recycling http://www.angloamerican.co.za/aa/development/
Maponya Mall, Soweto
Denel
Right-hand (!) drive Hummer
Altech Netstar pioneered the stolen vehicle tracking and recovery industry in SA in 1994, and is the market leader in term...
See you at the World Cup
Scientific production: SA top 25 Overall growth factor 1.5 1990-94 2004-08     Rank N Rank N Subject Area Change 1 4477 1 ...
CPUT 75 UCT 1562 UWC 240 US 1030 MRC ARC CSIR Groote Schuur Tyger- berg 8 24 5 1 21 108 43 83 41 34 300 800 100 150 300 40...
…  technologies in some industries are close to science, while in others there is little in the way of scientific foundati...
<ul><li><2006 reliable and very cheap electricity for industry. Massive environmental cost  </li></ul><ul><li>“ The perfec...
How many  does it take to  change  ?  Innovation is about meeting demand
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Changing Face V4

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This was presented by Micheal Khan at the Innovation Festival at Spier Wine Estate on 8 and 9 March 2010. The sponsor was Cape Biotech Trust to raise funds for the Southern African Innovation Network (SAINe).

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Changing Face V4

  1. 1. The Changing Face of Innovation in South Africa Prof. Michael Kahn Research and Innovation Associates and IERI, Tshwane University of Technology Innovation Festival 2010 Spier Estate, Lynedoch, Cape 8 March, 2010
  2. 2. The Big Picture <ul><li>1989: The fall of the Wall: ICT revolution opens the world </li></ul><ul><li>1990s … innovation the key driver of economic growth </li></ul><ul><li>2008: The fall of Wall Street </li></ul><ul><li>Linked crises : econo-technic and enviro-technic </li></ul><ul><li>How to link innovation and development? </li></ul><ul><ul><li>UN Millennium Project (2005) </li></ul></ul><ul><ul><li>Paris Statement on Innovation for Development (2007) </li></ul></ul><ul><ul><li>OECD Innovation Strategy (2010) </li></ul></ul><ul><ul><li>Sussex Manifesto 2 (gestating) </li></ul></ul><ul><li>The rise of the BRICs or BRICSA? </li></ul><ul><li>Scramble for Africa II </li></ul>
  3. 3. Technological innovation is critical to long-term economic growth. Most technological innovation consists of incremental change in existing industries . …. Sustained growth can occur only with the continuous introduction of truly new goods and services—radical technological innovations that disrupt markets and create new industries. The capacity to turn science-based inventions into commercially viable innovations is critical to radical technological innovation.’ (Branscomb and Auerswald, 2002) The quest ….
  4. 4. The evidence? Source: KDI and K4D
  5. 5. <ul><li>Industries must be helped to manage scarce resources more efficiently and to reduce greenhouse gas emissions through appropriate pricing of energy …Green economy initiatives will create new opportunities for enterprise development, job creation and the renewal of commercial and residential environments. Innovation and enterprise development are rightly the key focus areas of the work of the economic and employment cluster, led by Ministers Nkwinti and Pandor ... the cluster will oversee the development of sectoral strategies and actions to raise output, employment, productivity and exports. </li></ul><ul><li>Budget Speech Minister P Gordhan 17 February 2010 </li></ul>To budget is to plan …… .
  6. 6. <ul><ul><li>Pre 1948 </li></ul></ul><ul><ul><ul><li>Civil War I (1889-1902) and European War I & II; agriculture  mining  vertical integration  horizontal diversification  industrialisation </li></ul></ul></ul><ul><ul><ul><li>Minerals-Energy Complex </li></ul></ul></ul><ul><ul><li>1948 to 1994 </li></ul></ul><ul><ul><ul><li>Civil War II </li></ul></ul></ul><ul><ul><ul><li>Military-industrial complex </li></ul></ul></ul><ul><ul><ul><li>Constructed Crisis I: APARTHEID </li></ul></ul></ul><ul><ul><li>1994 - 2007 </li></ul></ul><ul><ul><ul><li>Constructed Crisis II: INCLUSION </li></ul></ul></ul><ul><ul><ul><li>Globalization; Commodities boom </li></ul></ul></ul><ul><ul><ul><li>Rise of Services </li></ul></ul></ul><ul><ul><li>2007 – </li></ul></ul><ul><ul><ul><li>Constructed Crisis III: SHOCK DOCTRINE </li></ul></ul></ul>Our Picture
  7. 7. The deviation from modernity SOCIAL INNOVATION GONE WRONG
  8. 8. <ul><li>Open economy with convertible currency </li></ul><ul><li>Limited inward FDI </li></ul><ul><li>Legislation for Human Rights & Dignity </li></ul><ul><li>Rudiments of a Welfare State </li></ul><ul><li>Rising intra-group inequality </li></ul><ul><li>Inadequate and ageing infrastructure </li></ul><ul><li>Persistently high unemployment </li></ul><ul><li>High burden of infectious disease </li></ul><ul><li>High levels of contact crime </li></ul><ul><li>Dysfunctional schooling </li></ul><ul><li>Overburdened higher education </li></ul><ul><li>High level skills deficit </li></ul><ul><li>Ongoing intermediate and capital goods gap </li></ul>It’s a long walk to freedom
  9. 9. <ul><li>African middle class emerged under apartheid; technical and entrepreneurial class throttled </li></ul><ul><li>High levels of industrial concentration </li></ul><ul><ul><li>Conglomerates do what makes sense to them </li></ul></ul><ul><ul><li>Adjust to the realities of the labour and consumer market </li></ul></ul><ul><ul><li>Mineral exports underwrite import of intermediates in boom times; symptoms of Dutch Disease </li></ul></ul><ul><li>The power of organized labour </li></ul><ul><ul><li>Hiring and firing; Wage levels </li></ul></ul><ul><li>A welfare state subscribing to fiscal discipline? </li></ul><ul><li>Industrial policy or interest group policy? </li></ul>Paradoxes and contradictions Where is our innovation space?
  10. 10. The future ain’t what it used to be
  11. 11. <ul><li>Innovation is the dissemination of a new good or service in an organization or market. New to the firm (or org), new to the market, new to the world. A new firm is an innovation. </li></ul><ul><li>Innovation comprises many activities </li></ul><ul><ul><li>Knowledge generation </li></ul></ul><ul><ul><li>Knowledge transfer – codified and tacit </li></ul></ul><ul><ul><li>Knowledge measurement </li></ul></ul><ul><ul><li>R&D important but not necessary … comprises creative work undertaken on a systematic basis in order to increase the stock and use of knowledge; “Business” main performer </li></ul></ul><ul><ul><li>High level skills are necessary to innovate and conduct R&D and speak to the ability to absorb and generate new knowledge </li></ul></ul><ul><ul><ul><li>Engineers and technicians </li></ul></ul></ul><ul><ul><ul><li>Designers and creative thinkers </li></ul></ul></ul><ul><ul><ul><li>Entrepreneurs, both economic and social </li></ul></ul></ul><ul><li>Framework conditions must support innovation </li></ul><ul><ul><li>Investment conditions </li></ul></ul><ul><ul><li>Contract and intellectual property law </li></ul></ul>
  12. 12. <ul><ul><li>Lack of internal funds </li></ul></ul><ul><ul><li>16% of innovating size class 1 firms </li></ul></ul><ul><ul><li>28% of innovating size class 2/3/4 firms </li></ul></ul><ul><ul><li>Lack of external funds </li></ul></ul><ul><ul><li>14.6% of innovating class 1 firms </li></ul></ul><ul><ul><li>18.9% of innovating class 2/3/4 firms </li></ul></ul><ul><ul><li>High cost of innovation </li></ul></ul><ul><ul><li>16% of innovating class 1firms </li></ul></ul><ul><ul><li>23% of innovating class 2/3/4 firms </li></ul></ul>Firms identify the most important barriers to innovation as ... Source: Blankley and Moses, 2009. Author
  13. 13. <ul><ul><li>Own funds – principal source </li></ul></ul><ul><ul><li>Backing ‘winners’ – PBMR (SASOL; ARMSCOR ....) </li></ul></ul><ul><ul><li>Bank finance – to established companies </li></ul></ul><ul><ul><li>Venture finance e.g. Venfin; Bioventures; HBD VC </li></ul></ul><ul><ul><li>R&D tax incentive </li></ul></ul><ul><ul><li>Close Corporation small business incentives </li></ul></ul><ul><ul><li>IDC SBVCU </li></ul></ul><ul><ul><li>FDI: mostly aquisitions –technology transfer (auto); little greenfield </li></ul></ul><ul><ul><li>Grants: NRF Blue Sky; Studentships; SARChI; Mobility (DST-EU); publications) </li></ul></ul><ul><ul><li>Innovation Fund/BRICS/TIA </li></ul></ul><ul><ul><li>Thumisamo </li></ul></ul><ul><ul><li>DTI – THRIP, SPII, EIP, CIP, SSAS, BPO, CIS </li></ul></ul><ul><ul><li>Core funding to Science Councils and research institutes – incremental budgeting </li></ul></ul>Financing innovation
  14. 14. People matter most! Source: Annual Reports, 2007 (Author) Source: DNE (1993),DST (2007), Author Full-time equivalent Researchers, 1992 & 2006 % Black Professionals and Researchers, 2008 ARC 30 CSIR 52 HSRC 63 MRC 55 NRF 61
  15. 15. From the OECD Review Given the scale of the total investment involved (in infrastructure projects), even quite a small constraint on its implementation is likely to have a large negative impact on the rate of innovation – perhaps creating a ‘chasm’ between engineering and implemented innovation that has much greater economic and social significance than the more frequently discussed ‘chasm’ between R&D and implemented innovation (OECD, 2008: 173)
  16. 16. Agents and linkages, local & global 100s NGOs POLITICAL LEGAL ENVIRONMENTAL CULTURAL STANDARDS ASSOCIATONS LINKAGES I.P. RIGHTS UNIVERSITIES 9 SCIENCE COUNCILS BUSINESS 55 GOVT. DEPTS INSTITUTES & MUSEUMS S&T SERVICES UTILITIES INFORMAL SECTOR
  17. 17. <ul><li>The national system of innovation (NSI) must be prepared to meet the requirements of innovation: </li></ul><ul><ul><li>Intervention of the State through public policy; </li></ul></ul><ul><ul><li>Understand how enterprises design their strategies of research and development (R&D); </li></ul></ul><ul><ul><li>Impact of education on the formation of human resources and training of technicians, researchers and other workers, and the social innovations related to such formation of human resources; </li></ul></ul><ul><ul><li>Role of industrial structure </li></ul></ul><ul><ul><li>Freeman (1987) </li></ul></ul>Pilot the system of innovation? Biotech Strategy, R&D Strategy, TYIP, TIA, IP Act ….
  18. 20. Emalahleni Water Recycling http://www.angloamerican.co.za/aa/development/
  19. 21. Maponya Mall, Soweto
  20. 22. Denel
  21. 23. Right-hand (!) drive Hummer
  22. 24. Altech Netstar pioneered the stolen vehicle tracking and recovery industry in SA in 1994, and is the market leader in terms of size, product range, and an unsurpassed private recovery infrastructure … employs over 500 people … 10,000 Altech Netstar tracking systems installed per month … operations in Zambia, Namibia, Swaziland, Botswana and Malaysia. Altech Netstar is able to recover vehicles in an average time of less than an hour. Accepted by insurers and motor manufacturers alike … locally designed and manufactured systems … include the Early Warning System with panic button, Vigil with full GPS/GPRS functionality, Cyber-Sleuth, the ever popular Sleuth, and Guardian. http://www.netstar.co.za/Content/About/background.aspx
  23. 25. See you at the World Cup
  24. 26. Scientific production: SA top 25 Overall growth factor 1.5 1990-94 2004-08     Rank N Rank N Subject Area Change 1 4477 1 6283 ENVIRONMENTAL SCIENCES & ECOLOGY 1.4 2 4097 2 5360 BIOCHEMISTRY & MOLECULAR BIOLOGY 1.3 18 1530 3 4529 INFECTIOUS DISEASES 3.0 3 3548 4 4411 PLANT SCIENCES 1.2 5 2355 5 4250 PHARMACOLOGY & PHARMACY 1.8 6 2328 6 3953 ZOOLOGY 1.7 8 2185 7 3943 GENETICS & HEREDITY 1.8 12 1821 8 3874 AGRICULTURE 2.1 7 2244 9 3632 CHEMISTRY 1.6 15 1576 10 3569 MATHEMATICS 2.3 17 1538 11 3532 ENGINEERING 2.3 27 1257 12 3387 PSYCHOLOGY 2.7 14 1604 13 3372 IMMUNOLOGY 2.1 10 1953 14 3334 BEHAVIORAL SCIENCES 1.7 26 1260 15 2747 PEDIATRICS 2.2 41 860 16 2497 PUBLIC, ENVIRONMENTAL & OCCUPATIONAL HEALTH 2.9 32 1072 17 2417 BUSINESS & ECONOMICS 2.3 36 942 18 2405 MICROBIOLOGY 2.6 13 1715 19 2378 PHYSICS 1.4 28 1187 20 2270 COMPUTER SCIENCE 1.9 37 911 21 2161 HEALTH CARE SCIENCES & SERVICES 2.4 22 1434 22 2023 BIODIVERSITY & CONSERVATION 1.4 4 2723 23 2012 PHYSIOLOGY 0.7 20 1478 24 2005 REPRODUCTIVE BIOLOGY 1.4 16 1566 25 1853 LIFE SCIENCES & BIOMEDICINE - OTHER TOPICS 1.2
  25. 27. CPUT 75 UCT 1562 UWC 240 US 1030 MRC ARC CSIR Groote Schuur Tyger- berg 8 24 5 1 21 108 43 83 41 34 300 800 100 150 300 400 48 29 10 13 7 FOR LOC
  26. 28. … technologies in some industries are close to science, while in others there is little in the way of scientific foundations. In some connections with universities are important, while in others there is little interaction. Patents are important in some industries but not in others. To be effective policies aimed to help industries develop must understand and respect these differences. (Rosenberg, 2009) Directions for policy? (The linear) model implies that there should be a link between HERD and BERD (but) there is no credible evidence for this. On the contrary, as in the South African innovation survey, countless surveys of OECD firms show that their main sources of technology are internal knowledge and other firms. Public sector research in general, and higher education research in particular, accounts for a small share of their total knowledge inputs to innovation (OECD, 2008: 186)
  27. 29. <ul><li><2006 reliable and very cheap electricity for industry. Massive environmental cost </li></ul><ul><li>“ The perfect storm” : ageing infrastructure, loss of skills , inadequate coal supply, ‘unexpected’ demand, and bad luck  brownouts and blackouts. </li></ul><ul><li>GEAR was a ‘third way,’ the electricity catastrophe is Naomi Klein’s ‘shock doctrine.’ </li></ul><ul><li>Import-parity-pricing eliminates comparative advantage of commodities inc coal. </li></ul><ul><li>Electricity costs set to double (triple) – mineral export pricing set externally; higher electricity input costs reduceds profit, not volumes? </li></ul><ul><li>A spur to innovation driven by (unintended consequences of) structural adjustment. </li></ul><ul><li>Private gain vs socialized risk </li></ul>Energy Constructed Crisis
  28. 30. How many does it take to change ? Innovation is about meeting demand

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